Rohit Chopra, director of the Consumer Financial Protection Bureau (CFPB), is aware that some loan officers are taking creative — and, as detailed in a recent HousingWire investigation, often illegal — approaches to winning business. And he would be willing to reexamine the decade-old rule that prohibits LOs from misclassifying lead sources to lower their own compensation, although it hasn‘t been a priority as mortgage servicing is higher on the agency‘s to-do list.
“It was supposed to prevent some of the mischief we saw in the original issues related to yield spread premiums, the issues related to steering borrowers to mortgages that were worse off for them,“ Chopra said of the LO comp rule at the MBA Secondary & Capital Markets Conference in New York on Monday.
“As a general matter, we are taking a look at all the old rules, even the ones that were just a decade ago, to see how they’re doing. We’ve done assessments on some of them … We haven’t put on tap reviewing LO comp. I’m open to it.“
Chopra added that he would like the industry’s help in determining where the CFPB wants more regulatory enforcement and where rules need to be updated.
“My sense is that we could use help in identifying specific places where people are going over the line. And you need us to be clear that is impermissible and, if appropriate, be able to take some enforcement action so that it’s crystal clear,” he told Mortgage Bankers Association president and CEO Bob Broeksmit.
“But I do hear constantly the ways to which there are creative paths to sidestep the law. It’s on our radar and we’re happy to work with you to figure out what’s the best way.“
Supreme Court ruling
In a discussion with Broeksmit, Chopra also touched on the bureau’s recent 7-2 Supreme Court victory, which ensures the agency’s survival, and the so-called mortgage “junk fees“ that the CFPB has been targeting.
Chopra told Broeksmit that the agency developed a “whole set of thinking“ in the event the ruling didn’t go in their favor, along with what would happen to the various rules the agency developed over the course of a decade — such as servicing rules, LO compensation and the Qualified Mortgage rule.
“I appreciate the mortgage industry being the adult in the overall financial services industry, saying we don’t want to just create constant chaos,“ Chopra told Broeksmit.
The agency’s court victory means it will resume going after “scam artists“ and others who break the law. “I don’t think it’s going to change how we operate,“ he said.
Relationships with credit bureaus
Broeksmit took issue with what he called an “overly broad“ interpretation of junk fees foisted upon consumers. They’re disclosed upfront on forms, he said, while noting that they’re required by other federal agencies.
“We are skeptical of your views on this. … These credit-report and credit-scoring fees are not subject to the normal forces of competition. They’re just levied on you and the borrower. A junk fee isn’t just what’s in it — it’s also what’s not subject to meaningful competition, or it’s for something nobody really wants.
“So, right now, you can disclose some of these ripoffs, but they shouldn’t be a ripoff. There should be a sense of the different choke points in the system that are pushing up costs. When a borrower is going to close, there’s so many other things going on, they’re not situated to evaluate what is fair or is not. If anything, I think, mortgage lenders are also victims of junk-fee practices.“
Chopra then pointed out the financial relationship between the trade group and the credit reporting industry.
“I get it. I know this is uncomfortable: FICO is sponsoring this [event]. You all work a lot with credit-reporting companies,“ he said. “But I think you have to be willing to stand up to some of it and to say these are fees that are fundamentally unfair. Even if we disclose them, they are outrageously priced.“
